Monday, 11 June 2018

Depositors are always on the lookout of earning a higher rate of interest in comparison to the State Bank of India (SBI) FD interest rates. When the earnings from a bank fixed deposits (FDs) stay at moderately average level, there are some alternatives such as corporate bonds and fixed deposits (FDs) with small finance banks, which offer nearly 150-200 basis points higher interest rate than that of bank FD of state-run banks such as State Bank of India (SBI). Another viable alternative for making some extra bucks is to deposit money in a fixed deposit (FD) scheme of an NBFC (non-banking financial company).

Bajaj Finserv, for instance, offers an interest rate upto 7.85 per cent (according to its website bajajfinserv.in), which is nearly 220 basis points higher than the SBI FD interest rates of 6.65 per cent for one year duration. Similarly, Kerala Transport Development Finance Corporation (KTDFC) offers an interest rate of 8.25 per cent for one-year, two-year and three-year fixed deposit (FDs). The long duration fixed deposits (FDs), for four years and five years, fetch an interest rate of 8 per cent, according to www.ktdfc.kerala.gov.in.

Mahindra finance offers fixed deposit (FD) interest rate as high as 8.3 percent for 33-month duration FD, while as low as 7.95 percent for 15 month duration FD, according to mahindrafinance.com.

Mahindra Finance Fixed Deposit (FD) Interest Rates

Tenure Interest

15 months 7.95%

20 months 8.05%

27 months 8.15%

33 months 8.3%

40 months 8.3%

Similarly, Shriram Transport Finance offers an interest rate of 7.65 percent for 12 month FD, 24 month FD. However, the long duration fixed deposit (FD) offers an interest rate of 8 per cent. The five -year FD fetches an interest rate of 8.25 per cent, according to www.stfc.in/deposits.aspx.

Shriram Transport Finance Fixed Deposit (FD) Interest Rates

Tenure Interest rate(non-cumulative)

12 months 7.65%

24 months 7.65%

36 months 8%

48 months 8%

60 months 8.25%

Even experts also laud NBFCs for their high interest-yielding ability.

"NBFCs offer relatively higher rate of interest ranging anywhere between 8.50-9.50 per cent in current market regime. This rate is comparatively higher than bank deposit by about 100-200 basis points which makes it extremely attractive for fixed income investors," Dinesh Rohira, founder and CEO, 5inance.com.

However Mr Rohira gives a word of caution, "On the flip side, one must comprehend that the deposit of NBFCs are not as safe as deposit of PSBs in terms of credit rating and timely interest payout. Investor should always choose one with higher credit rating of A-AAA of NBFC with operationally efficient business model."

He further said, "Investor should be wary about low-rating NBFCs. The investors are also exposed to risk of default by issuer, where it may not service the interest or maturity payments on longer duration period. Therefore, investor should opt for short to medium term deposit duration."

There is a list of NBFCs which are allowed to accept deposits. The list shows that there are 23 registered NBFCs in Delhi.

The list can be accessed here.

To protect the interests of depositors from the NBFC defaulters, the Reserve Bank of India (RBI) introduced a scheme of ombudsman in February this year, where the depositors can file a complaint if the NBFC skips the interest payment.

RBI, in a recently released newspaper stated: "If your grievance regarding deficiency in service against any deposit-taking NBFC registered with the RBI, is not redressed within 30 days or you are not satisfied with the reply given by the NBFC concerned, you can approach the NBFC ombudsman with complete details at the address: The NBFC Ombudsman (North Zone) c/o Reserve Bank of India 2nd floor, 6, Sansad Marg, New Delhi-110001. Phone numberPh: 011-2372 4856, email: nbfcconewdelhi@rbi.org.in".